No.2 mall operator in the US files for bankruptcy
16 Apr 2009
The second largest US mall owner, General Growth Properties Inc, today filed for bankruptcy protection in one of the biggest real estate failures in US history.
Ending months of speculation, the Chicago-based mall owner, which listed total assets of $29.56 billion and total debts of $27.29 billion, sought Chapter 11 bankruptcy protection from creditors along with 158 of its more than 200 US malls, while it seeks to restructure some of its debt.
The move by the Chicago-based company had been widely anticipated since the autumn, when the company warned it might have to seek bankruptcy protection if it didn't get lenders to rework its debt terms. Efforts to negotiate with its unsecured and secured creditors ultimately fell short late last month.
"While we have worked tirelessly in the past several months to address our maturing debts, the collapse of the credit markets has made it impossible for us to refinance maturing debt outside of Chapter 11," CEO Adam Metz said in a statement.
General Growth's filing in the US bankruptcy court in Manhattan makes it one of the largest non-financial companies to succumb to the financial crisis in the country. Before the bankruptcy protection filing, the company had defaulted on several mortgages as well as a series of bonds. It has also put several of its flagship properties up for sale.
General Growth said it intends to reorganize with the aim of cutting its corporate debt and extending the terms of its mortgage maturities. It also said it will continue operating all of its shopping centres during the bankruptcy process. The company said shoppers at its malls would not be affected by its decision to file for bankruptcy protection.
''Our restructuring will be invisible to the customers who visit our properties every day," President and Chief Operating Officer Thomas H. Nolan Jr. said.
Analysts and other real estate experts have speculated that mall owners Simon Property Group Inc and Westfield Group would be interested in buying some of General Growth's assets from bankruptcy.
General Growth's history stretches back to 1954, when brothers Matthew and Martin Bucksbaum expanded their family's grocery business by building the Town and Country Center in Cedar Rapids, Iowa, one of the Midwest's first regional shopping malls. General Growth became the No. 2 US mall owner in 1989 when it bought the assets of Center Cos., and in 1993 raised about $300 million in an initial public offering.
For the first time in its history, General Growth in October was turned over to someone outside the family when it replaced CEO John Bucksbaum, Matthew's son, with 47-year-old Metz. John Bucksbaum, 52, replaced his father as chairman last year, and remains in that position. Martin Bucksbaum died in 1995.
In recent months, the new management team under Metz has been wrestling with loan after loan coming due, bargaining for extensions. As of the end of 2008, General Growth had $1.18 billion in past due debt and an additional $4.09 billion of debt that could be accelerated by its lenders.
In February, the company reported lower-than-expected fourth-quarter funds from operations and a dip in revenue amid weaker retail rents. The company has suspended its dividend, halted or slowed nearly all development projects and cut its work force by more than 20 per cent. It also has sold some of its non-mall assets.
Earlier this month, the company had been seeking to restructure $2.25 billion of Rouse bonds, offering bondholders a percentage on their bonds if they allowed the company to skip interest payments and principal until the end of the year. But the company failed to garner the necessary support it needed.
